Audi Aims for Record Sales in China and U.S.

By WSJ Staff

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Audi Q5 vehicles.

INGOLSTADT, Germany—German luxury-car maker Audi AG is hopeful of selling 700,000 cars a year in China later this decade and aims to sell more than 130,000 cars in the U.S. for the first time this year, as demand for premium vehicles continues to surge.

Audi is the market leader in Chinese premium-car segment, thanks to an early market entry by its parent Volkswagen AG. Last year, it overtook Daimler AG’s Mercedes-Benz brand as the world’s second best-selling luxury car maker behind BMW AG, fueled by its large footprint in the fast-growing Chinese market and sales gains in the U.S.

And while China’s economy grew at a lower-than-expected 8.1% in the first quarter—its slowest pace in three years—Audi doesn’t expect a dramatic slowdown in the Chinese economy.

“The Chinese car market is in a transition phase toward more normal growth rates and there is likely to be a slight slowdown in the volume segment, but we don’t see this in the premium segment,” sales chief Peter Schwarzenbauer said in a recent interview at Audi’s headquarters.

Audi plans to rapidly expand its dealership network across China and open stores in several large cities where it isn’t present now. Local production capacity will be ramped-up as well.

“We’ll increase production capacity in China to 700,000 cars a year by 2015 and it is our goal to fully utilize this one or two years later,” Mr. Schwarzenbauer said. Audi had previously expected to reach the 700,000 sales mark in China by 2020.

Still, luxury-car competition is intensifying and will be comparable with more mature markets in four or five years’ time, Mr. Schwarzenbauer said. This trend will also affect the compact cars, where luxury-car makers are plotting further inroads.

China has emerged as a crucial market for luxury-car makers in recent years. Some analysts, however, have voiced concerns that relying on Chinese sales makes the companies vulnerable to regulatory changes, which in the past often came without prior notice. Mr. Schwarzenbauer acknowledged there is a certain risk, but he said the long-term growth potential in China remains enormous.

Mr. Schwarzenbauer said sales volumes of Audi’s compact A3 model in China could gradually reach the level of its best-selling A4 and A6 models and reach about 100,000 cars a year. Audi will launch the new-generation of its A3 hatchback in the second half of this year and add a sedan version to model’s lineup.

Audi also plans to expand its range of sports-utility-vehicles in coming years, one of the key growth drivers for Audi and its peers in recent quarters. Mr. Schwarzenbauer said SUVs could account for around 50% of global premium-car sales in the midterm and possibly even more in China. He said only few SUV buyers choose a sedan or a hatchback as their next car once they got used to the comfortable high driving position of an SUV.

Mr. Schwarzenbauer said Audi’s robust sales growth in the first quarter continued in April. Audi’s global sales rose 10.8% year-to-year in the first three months to 346,100 cars, marking a new quarterly sales record for the Ingolstadt-based company.

He said thanks to a powerful rebound following the financial crisis, Russia next year should overtake Germany as Europe’s largest car market. “We want to sell 30,000 cars there this year and 75,000 by the end of the decade,” Mr. Schwarzenbauer said. Audi sold 23,250 cars in Russia last year and 254,000 in Germany.

He expects Audi to increase sales in Europe this year despite a shrinking overall market and economic concerns in many countries amid the debt crisis. Mr. Schwarzenbauer forecast record sales in the U.K. this year despite tough austerity measures.

Audi’s U.S. sales are surging as well, driven by the Q5 SUV, the A6 and A7 models and the flagship A8 sedan. Mr. Schwarzenbauer said 65% of customers buying an A7 drove rival cars before. He said Audi’s U.S. sales are expected to cross the 130,000 car sales mark this year for the first time, from 117,500 in 2011.

On Wednesday, Audi confirmed that it will start producing cars in Mexico as of 2016 to boost its footprint in North America in a bid to outpace BMW and become the world’s largest luxury-car maker.

Comments (2 of 2)

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